| SooperKanoon Citation | sooperkanoon.com/61409 |
| Court | Income Tax Appellate Tribunal ITAT Delhi |
| Decided On | Sep-27-1985 |
| Judge | G Krishnamurthy, S Narayanan, S Mehra |
| Reported in | (1985)14ITD300(Delhi) |
| Appellant | Wealth-tax Officer |
| Respondent | A.K. Tandon |
The assessee by the instant cross-objection has taken certain objections during the assessment year 1977-78. Since the parties, facts, circumstances and issues are identical, for the sake of convenience we propose to dispose of all the three matters by a single order.
2. To start with we shall take up the revenue's WT Appeal No. 104 (Delhi) of 1983 for the assessment year 1976-77. We take up first of all ground No. 3 of the appeal which is to the following effect : ... holding that the figure of monthly rent payable by tenants to the owner at Rs. 1,195 under the provisions of Delhi Rent Control Act, 1958 should be substituted for self-occupied portion of the property for working out the fair market value.
3. The assessee is a resident individual by status and the valuation date is 31-3-1976. The assessee is one of the partners in the firm known by name and style as Wenger & Co., Connaught Place, New Delhi. A return was filed on 31-3-1976 showing a net wealth at Rs. 4,61,700 covering both movable and immovable properties.
4. In the said return, the assessee included a sum of Rs. 4,02,952 as the value of his interest in the assets of the said firm. The said firm owned a property known as Wenger Building, A-Block, Connaught Place, New Delhi. The valuer vide his report valued the said property at Rs. 7,20,570. The assessee's share in the said property is of the order of 30 per cent. The return was filed on the basis of the approved valuer's report.
5. The learned WTO not being satisfied with the valuer's said report referred the issue of the valuation of the said property, under Section 16 of the Wealth-tax Act, 1957 ('the Act') to the Departmental Valuation Officer (DVO). The said officer determined the value of the property on the relevant valuation date at Rs. 44,44,000 vide his report dated 20-3-1981. The learned WTO thereafter on the basis of the said report adopted the value of the said building on the said date at the figure shown by the DVO in his report. Considering the value of his share in the said property shown by the assessee, the learned WTO made an addition of Rs. 11,17,029 to the net wealth reflected by the assessee. Consequently, the net wealth was determined at Rs. 15,11,437 vide order dated 27-3-1981 made under Section 16(3).
6. The assessee agitated the finding of the learned WTO with respect to the valuation of the property known as 'Wenger's Building' as on 31-3-1976. Before the learned Commissioner (Appeals) on behalf of the appellant, Shri G.R. Agnihotri, the learned counsel, made, inter alia, the following submissions : a. that the learned DVO estimated the fair market value of the property on an imaginary and untenable basis and also without considering the comparable cases ; b. that the property in question was subject to the provisions of the Delhi Rent Control Act and the building was tenanted as well as self-occupied for business purposes ; c. that the learned DVO was wrong in adopting the 'reversionary' method of valuation and ; 7. The learned Commissioner (Appeals) being convinced by the contentions raised before him on behalf of the assessee, held that the provisions of the Delhi Rent Control Act, 1958 were applicable even to the self-occupied portion of the property and the value of the assessee's share be determined after determining the value of the building on the basis of the rent considering the application of the provisions of the said Act. The deduction for repairs and maintenance were allowed to the extent of 1/6th instead of 1/l2th and the addition on account of reversionary value of land was found unjustified.
8. The revenue filed the instant appeal being aggrieved by the above findings of the learned Commissioner (Appeals).
9. On behalf of the appellant, Shri Birjinder Singh, the learned senior departmental representative, supported the assessment order on the point and further argued that the learned Commissioner (Appeal) was not justified to hold that the provisions of the Delhi Rent Control Act were applicable to the self-occupied portion of the property for working out the fair market value. He contended that for such portion, the land and building method was one of the approved methods and that the fair market value was required to be determined on the basis of the market rent. In any case, he contended that the method adopted by the DVO in his report dated 20-3-1981 had already been approved by the Hon'ble Delhi High Court in the assessee's own case Wenger & Co. v. DVO [1978] 115 ITR 648. The reliance by the learned departmental representative was also placed on certain other judicial pronouncements.
10. On behalf of the assessee, Shri G.R. Agnihotri, the learned counsel very strenuously found fault with the stand taken by the learned departmental representative and also repeated all the arguments made before the lower authorities. He very seriously contested the correctness of the report of the 80VV. The reliance was placed by the learned counsel on many judicial pronouncements.
11. The argument on behalf of the contesting parties have been heard and considered and record carefully examined. The 'Wenger Building' was purchased by the firm Wenger & Co. from Dayal Singh Trust Society and Shri Mool Chand Kharaiti Ram Trust vide sale deeds dated 9-3-1962 and 28-9-1963 for Rs. 3,90,000 and Rs. 1,50,000, respectively. The total consideration, thus, comes to Rs. 5,40,000. The building was constructed some time during 1930 on a plot of land measuring 1051 sq.
yds. having two storeys. Before such purchase the firm, i.e., Wenger & Co., was occupying substantial part of the said building as a tenant and in fact had been running its business since 1930. For such occupation the firm was paying a rent of Rs. 1,195 per month to the vendors. The property appears to have been purchased by the firm in 1962-63. Besides the said firm in the said property there were six other tenants paying monthly rent of Rs. 6,837 in all for the rented portion occupied by them. Thus, the property before purchase was occupied by the firm and the other six tenants. After purchase the firm became the owner in possession of the portion earlier occupied and the balance portion was with the tenants.
12. In the present ground of the revenue's appeal, we are considering the application of the provisions of the Delhi Rent Control Act to the self-occupied portion of the property of the firm. It is seen that for application of the said Act there should be a property, the same should be put on rent and for paying the rent there should be a tenant and an owner to receive the rent. Unless all these elements are there the provisions of the said Act could not be made applicable. In the case before us the position before the purchase of property by the firm was altogether different. The owners were two trusts. The assessee, along with six more, was a tenant. The rent was paid. Therefore, the provisions of the Act were aptly applicable. Even after purchase such provisions continued to be applicable with respect to the portion still in occupation of the tenants. However, the position with respect to portion before and after the purchase occupied by the firm was different. Before the purchase the firm was the tenant. Consequent upon such purchase the firm became the owner in possession. There was nobody to realise the rent. Also there was nobody to pay the rent. The monthly rent of Rs. 1,195, earlier paid by the firm to the owners, became non-existent and inconsequential after the purchase. The firm, in fact, occupied the specified portion as a free-hold owner. The provisions of the Delhi Rent Control Act are silent about the firm's relation with the self-occupied portion of the property.
13. The learned Commissioner (Appeals), in the given circumstances, does not appear to be justified to hold that the provisions of the Delhi Rent Control Act were applicable to the self-occupied portion of the property for working out the fair market value. In fact, such fair market value was required to be determined on the basis of principle adopted by the learned DVO, which principle had earlier been approved by the Hon'ble Delhi High Court in the assessee's own case. On behalf of the assessee, Shri G.R. Agnihotri, the learned counsel, very vehemently found fault with the approach and method of the DVO. We do not propose to deal with each facet pointed out by the learned counsel as the assessee will have a proper opportunity to make his comments on the method. At the present juncture, we are concerned with the limited question as to whether the provisions of the Act were relevant for working out the fair market value. Our considered answer is in the negative and against the assessee. We, therefore, hold that the learned Commissioner (Appeals) was not justified to observe as he did. Thus, the value of the property has got to be determined according to the method adopted by the learned DVO, of course, subject to the objections raised by the learned counsel and their proper consideration at the appropriate stage. We decide this issue accordingly. Matter is returned to the file of the learned Commissioner (Appeals).
Directing the WTO to work out the fair market value of property known as Wengers Building, Connaught Place, New Delhi in view of the above method and to determine the value of assessee's share therein as a co-owner for purposes of his wealth-tax assessment ; 15. In view of our finding on issue No. 3, we do not hold that the method adopted by the learned DVO, for valuing the self-occupied property of the firm was approved and correct. We leave this ground at that. However, the assessee's share in the property has got to be determined after determining the value in the manner adopted by the departmental valuer.
16. On accumulative effect of our findings on ground Nos. 3 and 4 of the revenue's appeal, we set aside the impugned order on the point and in fact restore the matter to the file of the learned Commissioner (Appeals) with a direction that he should determine the value of the property in accordance with the method adopted by the learned DVO. The learned Commissioner (Appeals) should as well look into and decide the various objections to be raised before him on behalf of the assessee against the valuation report.
17. The second ground of the revenue's appeal is against the deduction for repairs and maintenance at 1/6th against 1/12th allowed by the learned WTO. Since the matter is being referred back to the learned Commissioner (Appeals), he should look into this ground as well keeping in view the provision of law applicable on the point. This ground is determined accordingly.
18. The ground No. 2 of the revenue's appeal is against the deletion of the addition of Rs. 10,51,155 on account of reversionary value of the land. The learned Commissioner (Appeals) deleted this addition with the following observations : The contentions of the appellant in this regard are not at all without force. A similar view has been taken by the ITAT, New Delhi Bench 'A', in the case of Brig. Gurbax Singh v. WTO [WT Appeal Nos.
980 and 981 (Delhi) of 1976-77 and 348 (Delhi) of 1977-78] relating to the assessment years 1974-75, 1975-76 and 1976-77, where, under identical circumstances, the learned members of the Tribunal vide their order dated 29-1-1979 have held that the additions made by the DVO to the value of the property known as 'Scindia House', New Delhi in respect of the alleged reversionary value of land were unsustainable. The Tribunal followed the decision of the Calcutta High Court in the case of CIT v. Smt. Ashima Sinha [1979] 116 ITR 26. Respectfully following the ratio of the law laid down by the Calcutta High Court in this case, which was followed by the Tribunal, Delhi Bench 'A', in the case of Brig. Gurbax Singh referred to above. I am inclined to hold that the DVO in the instant case was not at all justified in adding to the value of the property known as Wenger's Building, the reversionary value of the land at Rs. 10,51,151.
19. It is seen that the finding is based on the decision of the Hon'ble Calcutta High Court and the Tribunal's order in the case of Brig.
Gurbax Singh v. WTO [WT Appeal Nos. 980 and 981 (Delhi) of 1976-77 and 348 (Delhi) of 1977-78]. We do not find any error in the finding on this point recorded by the learned Commissioner (Appeals). The order on this point is, therefore, confirmed.
20. The ground No. 5 of the revenue's appeal is to the following effect : Directing the WTO to allow exemption under Section 5(1)(iv) of the Wealth-tax Act, 1957 in respect of his interest in the property known as 'Wenger's Building' held by a partnership firm.
21. On behalf of the appellant, the assessment order on the point was supported. On behalf of the assessee, the reliance was placed on the impugned order.
22. The arguments made by the contesting parties on this issue have been heard and considered and record carefully perused. The building in question is owned by the firm. The assessee is one of the partner in the said firm. The property does not and in fact cannot belong to the assessee. The assessee has got interest as the partner of the firm. The exemption under Section 5(1)(iv) of the Act is available to an assessee to whom the property belongs. Thus, on a bare reading of the section, it is possible to infer that the assessee is not entitled to exemption in respect of a property which does not belong to him.
The preceding observations does not, however, mean that the exemption with respect to the property in question is altogether to be denied. In fact, while determining the interest of the assessee in the net wealth of the firm, such net wealth is to be determined. While so determining the firm for a limited purpose has got to be considered as an assessee under the Act and exemption under Section 5(1)(iv) has to be allowed only once in the firm's hands while determining the net wealth. After such determination, the share or allocation will be made to the partners and to them no further exemption under this section would be available. The learned WTO negatived the assessee's claim for exemption. The learned Commissioner (Appeals) negatived such finding of the learned WTO. In fact, the learned WTO should have determined the net wealth of the firm under the relevant rules before including the same in the assessee's hands. Such attempt does not appear to have been made. The learned Commissioner (Appeals) now should determine the net wealth as suggested above. The exemption in the assessee's hands is not straightaway available. For such a conclusion, we derive full support from the ratio in the case of CWT v. Nand Lal Jalan [1980] 122 ITR 781 decided by their Lordships of the Patna High Court wherein it was held that in determining the net wealth of the firm by reference to rule the exemption under Section 5(1)(iv) was admissible (sic). The Tribunal's order in WT Appeal Nos. 159 to 164 (Delhi) of 1981, for the assessment years 1972-73 to 1974-75, is not helpful to the assessee as the ratio in the above case was not discussed in the order, maybe the case was not mentioned before the Bench. Similarly, the order in the case of L.
Gulabchand Jhabakh v. WTO [1982] 1 SOT 613 (Mad.) (SB) is of no help as the ratio in the case of Nand Lal Jalan (supra) was not discussed. In the light of the preceding paragraphs, we set aside the learned Commissioner (Appeals)'s order on this point and restore the matter to his file with a direction that the issue be determined in the light of the above observations.
23. In the result, the ground No. 1 of the revenue's appeal is rejected and ground Nos. 2 to 5 are restored to the file of the learned Commissioner (Appeals).
24. Next, we take up the revenue's WT Appeal No. 412 (Delhi) of 1983 for the assessment year 1977-78. All the grounds taken by the revenue are the same as during the preceding assessment year. For the same reasons, the ground No. 1 is rejected. The point pertaining to the deletion on account of land is rejected. The issue pertaining to the exemption under Section 5(1)(iv) and the remaining grounds are restored to the file of the learned Commissioner (Appeals).
25. The assessee by his cross-objection has taken various grounds mainly pertaining to the application of provisions of rule IBB of the Wealth-tax Rules, 1957 ('the Rules'). It is seen that the assessee, inter alia, took the following ground before the learned Commissioner (Appeals) : The lower authorities have erred in not following the order of the Special Bench of the Tribunal in the case of Biju Patnaik v. CIT [1982] 1 SOT 623 (Delhi).
26. It is seen as if this ground was raised before the learned Commissioner (Appeals) but no discussion thereon attempted. In these circumstances, we restore this ground to his file for determination on the basis of the facts and the provisions of law applicable on the point.
27. In the result, the appeals and the cross-objections are partly allowed.
1. I have had the benefit of reading the order of my learned brother.
There are some points on which I have to record somewhat different conclusions. These are as follows : 2. In WT Appeal No. 104 of 1983 for the assessment year 1976-77 one of the objections for the revenue is as under : The learned Commissioner (Appeals) erred in holding that the figure of monthly rent payable by tenants to the owner at Rs. 1,195 under the provisions of the Delhi Rent Control Act should be substituted for self-occupied portion of the property for working out the fair market value.
3. My learned brother in paragraph Nos. 12 and 13 of his order has disposed of this issue observing as under : 12. In the present ground of the revenue's appeal we are considering the application of the provisions of the Delhi Rent Control Act to the self-occupied portion of the property of the firm. It is seen that for application of the said Act there should be a property, the same should be put on rent and for paying the rent there should be a tenant and an owner to receive the rent. Unless all these elements are there, the provisions of the said Act could not be made applicable. In the case before us, the position before the purchase of property by the firm, was altogether different. The owners were two trusts. The assessee, along with six more, was a tenant. The rent was paid(. Therefore, the provisions of the Act were aptly applicable. Even after purchase such provisions continued to be applicable with respect to the portion still in occupation of the tenants. However, the position with respect to portion before and after the purchase, occupied by the firm, was different. Before the purchase, the firm was the tenant. Consequent upon such purchase the firm became the owner in possession. There was nobody to realise the rent. Also there was no body to pay the rent. The monthly rent of Rs. 1,195 earlier paid by the firm to the owners, became non-existent and inconsequential after the purchase. The firm, in fact, occupied the specific portion as a free-hold owner. The provisions of the Delhi Rent Control Act are silent about the firm's relation with the self-occupied portion of the property.
13. The learned Commissioner (Appeals) in the given circumstances does not appear to be justified to hold that the provisions of the said Act were applicable to the self-occupied portion of the property for working out the fair market value. In fact, such fair market value was required to be determined on the basis of principle adopted by the learned Departmental Valuation Officer, which principle had earlier been approved by the Hon'ble Delhi High Court in the assessee's own case. On behalf of the assessee Shri G.R. Agnihotri, the learned counsel, very vehemently found fault with the approach and method of the Departmental Valuation Officer. We do not propose to deal with each fault pointed out by the learned counsel as the assessee will have a proper opportunity to make his comments on the method. At the present juncture we are concerned with the limited question as to whether the provisions of the Act were relevant for working out the fair market value. Our considered answer is in the negative and against the assessee. We, therefore, hold that the learned Commissioner (Appeals) was not justified to observe as he did. Thus the value of the property has got to be determined according to the method adopted by the learned District Valuation Officer and approved by the High Court, of course, subject to the objections raised by the learned counsel and their proper consideration at the appropriate stage. We decide this issue accordingly. Matter is set aside to the file of learned Commissioner (Appeals).
4. I am unable to agree with the above approach. The provisions of the Delhi Rent Control Act had to be considered, according to the learned counsel for the assessee, in valuing the self-occupied portion of Wenger's Building. The departmental representative, on the other hand, argued that it was not relevant. In paragraph No. 13 of my learned brother's order the decision given is that the Delhi Rent Control Act has no relevance. For this purpose, reliance is placed on the decision of the Delhi High Court in Wenger & Co.'s case (supra). On the other hand, the counsel for the assessee sought to show from the decision of the Supreme Court in Amolak Ram Khosla v. CIT [1981] 131 ITR 589 that the concept of the standard rent under the Delhi Rent Control Act cannot be ignored in the computation of annual value. In Amolak Ram Khosla''s case (supra), the property in question was both self-occupied and let out and the Supreme Court's view was that the standard rent under the Delhi Rent Control Act had to be kept in view in computing the 'annual value' under the Income-tax Act, 1961 ('the 1961 Act'). It will, therefore, be difficult to ignore this decision of the Supreme Court and say, categorically, that the concept of standard rent of the Delhi Rent Control Act is not applicable at all in wealth-tax proceedings. No doubt, under the Act what is to be determined is the market value but then under the Act, rules have been enacted and one particular rule which is relevant for valuation of property (though with regard to mainly residential houses) does use the expression 'gross maintainable rent'. That term again is defined in the same phraseology as 'annual value' is defined under the 1961 Act.
5. It is true that the Delhi High Court in Wenger & Co.'s case (supra) supported as correct a certain method of valuation of the DVO in this very case, but as is clear from the judgment itself, the exposition of the meaning of the term 'annual value' under the 1961 Act, as found in the decision of the Supreme Court in Amolak Ram Khosla's case (supra), was not before the Delhi High Court. The matter considered by the Delhi High Court arose out of a writ petition and the grounds of challenge were : a. no cogent evidence or basis for fixing the fair market value of the self-occupied portion of Wenger's building was available in the report of the DVO ; b. the DVO had relied on some information gathered behind the back of the assessee.
The Delhi High Court found no merit in the above challenges and also held (at p. 658) that the DVO's valuation of the self-occupied portion was not based on an irrational approach. At the same time, it will be evident from their judgment (at p. 656) that their Lordships dismissed the specific argument of the petitioner that the valuation of the self-occupied portion should have been done on the basis of standard rent or annual letting value, with a very brief notice. There is no reference to the phraseology of rule IBB introduced with effect from 1-4-1979 and there is no reference to Amolak Ram Khosla's case (supra).
The Delhi High Court could not refer to such matters as its judgment was given earlier, i.e., on 30-8-1978. It would be fair, therefore, not to record any positive opinion at this stage but simply restore the matter to the first appellate authority on the ground that the first appellate authority has not, inter alia, balanced the weight of the Delhi High Court's opinion in Wenger & Co.'s case (supra) against the exposition of the Supreme Court in Amolak Ram Khosla's case (supra).
Hence, while I agree with my learned brother to the matter being restored to the Commissioner (Appeals), I do not place any restraints on the Commissioner (Appeals) in deciding this issue afresh. He will dispose of the issue in accordance with law after hearing the parties.
6. In view of the above position, I am unable to agree with the opinion expressed in paragraph No. 15 of my learned brother's order to the effect that the method adopted by the DVO for valuing the self-occupied property of the firm is correct. My observations .and conclusion in this regard are the same as in paragraph No. 5 (supra).
7. Again with regard to paragraph No. 16 of my learned brother's order, my observations and conclusion in paragraph No. 5 (supra), will apply equally.
8. The next objection of the revenue which requires notice is as under : The learned Commissioner (Appeals) erred in holding that the deduction for repairs and maintenance equal to 1/6th of gross annual rent of property is allowable as against 1/12th allowed by the Wealth-tax Officer.
My learned brother has disposed of this objection in paragraph No. 17 of his order as under : The second ground of the revenue's appeal is against the deduction for repairs and maintenance at 1/6th against 1/12th allowed by the learned WTO. Since the matter is being referred back to the learned Commissioner (Appeals) he should look into this ground as well keeping in view the provisions of law applicable on the point. This ground is determined accordingly.
The assessee had claimed repairs at '1/6th'. This was allowed by the Commissioner (Appeals). At page 80 of the paper book, the assessee has filed a copy of the Tribunal's order in Diljit Singh [WT Appeal Nos. 11 to 13 (Delhi) of 1973-74 dated 27-9-1974]. The Tribunal has clearly held here that in wealth-tax proceedings also 1/6th repairs should be allowed. In fact this was the view of the Punjab and Haryana High Court in Dina Nath v. CED [1970] 77 ITR 193. This was an estate duty case and the Court saw absolutely no reason why, following the Indian Income-tax Act, 1922, in valuation under the Estate Duty Act, 1953 also, repairs should not be allowed at 1/6th. The matter has been referred back by my learned brother to the Commissioner (Appeals). While deciding this issue afresh the Commissioner (Appeals) will also keep the above observations in view.
9. Lastly, I come to the assessee's claim for exemption under Section 5(1)(iv). Here the issue stands covered squarely in favour of the assessee by the decision of the Special Bench of the Tribunal in L.
Gulabchand Jhabakh's case (supra). I, therefore, do not think it necessary to discuss the issue in more details. The facts are already recorded in paragraph No. 22 of my learned brother's order and I have nothing to add to them. My learned brother has, however, taken the view that the Commissioner (Appeals) was not correct in holding that the assessee, as a partner, was entitled to exemption under Section 5(1)(iv) in respect of his interest in the partnership property known as Wenger's Building. In my view, the Commissioner (Appeals)'s order is correct as it is in line with the order of the Special Bench of the Tribunal in L. Gulabchand Jhabakh's case (supra). Hence, I am unable to concur in the contrary view recorded by my learned brother.
10. My learned brother in paragraph No. 23 of his order has referred in this regard to the decision in Nand Lal Jalan's case (supra). I find, on a reference to the Special Bench's order in L. Gulabchand Jhabakh's case (supra), that in fact reliance was placed by the assessee on that decision before the Special Bench. It is, therefore, clear that the Special Bench of the Tribunal arrived at its decision in L. Gulabchand Jhabakh's case (supra) after a due consideration of the judicial authorities relevant. I would respectfully follow the Special Bench's order in L. Gulabchand Jhabakh's case (supra) and reject the revenue's contentions in this regard.
We state below the points of difference that have arisen in this group of appeals between us and refer the same to the President, for a decision in terms of Section 255(4) of the Act ; 1. Whether, the common issue raised by the revenue in ground Nos.
(iii), (iv), (in), (iv,) (iii) and (iv) in WT Appeal Nos. 104, 412, 103, 411 and 102 and 413, respectively, viz., 'The learned Commissioner (Appeals) erred in holding that the figure of monthly rent payable by tenants to the owner at Rs. 1,195 under the provision of the Delhi Rent Control Act should be substituted for self-occupied portion of the property for working out the fair market value' should be restored to the Commissioner (Appeals) for determining the value of the property in question with the restriction that it has to be done by the Commissioner (Appeals) according to the method adopted by the District Valuation Officer and approved by the High Court in this case for the assessment year 1972-73 : or Whether, the issue has to be restored to the file of the Commissioner (Appeals) without any such restrictions, in view of the Supreme Court's decision in Amolak Ram Khosla v. CIT[1981] 131 ITR 589, read with rule IBB of the Wealth-tax Rules, 1957, for disposal afresh in accordance with law? 2. Whether, the common objection of the revenue to the decision of the Commissioner (Appeals) in allowing the exemption claimed under Section 5(1)(iv) of the Act in respect of the interest of the assessee-partners in the property known as 'Wenger's Building' is to be reversed as incorrect ; or Whether, it is to be upheld as correct in view of the direct authority (in the assessee's favour) on this issue found in the decision of the Special Bench of the Tribunal in Z,. Gulabchand Jhabakh v. WTO [1982] 1 SOT 613 1. The President of the Tribunal assigned to me the task of resolving the difference of opinion that arose between the two of my colleagues, which I shall presently state. I call it a task because it had been quite a task to get at the point of difference of opinion and also to resolve it. But once I discovered the point of difference of opinion, let me honestly confess that I did not find much difficulty in resolving it. The point of difference of opinion referred to me is : 1. Whether, the common issue raised by the revenue in ground Nos.
(iii), (iv), (iii), (iv), (ii) and (iv) in WT Appeal Nos. 104, 412, 103, 411 and 102 and 413, respectively, viz., 'The learned Commissioner (Appeals) erred in holding that the figure of monthly rent payable by tenants to the owner at Rs. 1,195 under the provisions of the Delhi Rent Control Act should be substituted for self-occupied portion of the property for working out the fair market value' should be restored to the Commissioner (Appeals) for determining the value of the property in question with the restriction that it has to be done by the Commissioner (Appeals) according to the method adopted by the District Valuation Officer and approved by the High Court in this case for the assessment year 1972-73 ; or Whether, the issue has to be restored to the file of the Commissioner (Appeals) without any such restrictions, in view of the Supreme Court's decision in Amolak Ram Khosla v. CIT [1981] 131 ITR 589, read with rule IBB of the Wealth-tax Rules, 1957, for disposal afresh in accordance with law? 2. Whether, the common objection of the revenue to the decision of the Commissioner (Appeals) in allowing the exemption claimed under Section 5(1)(iv) of the Act in respect of the interest of the assessee-partners in the property known as 'Wenger's Building' is to be reversed as incorrect; or Whether, it is to be upheld as correct in view of the direct authority (in the assessee's favour) on this issue found in the decision of the Special Bench of the Tribunal in L. Gulabchand Jhabakh v. WTO [1982] 1 SOT 613 What the first question, in my opinion, conveyed was whether the Commissioner (Appeals) should revalue the property by applying the ratio of the Supreme Court decision in Amolak Ram Khosla's case (supra), the Supreme Court has to consider as to how the annual value of a property both under self-occupation and tenanted was to be determined for the purpose of Sections 22 and 23 of the 1961 Act reconciling with the provisions of the Delhi Rent Control Act. The assessee before the Supreme Court was the owner of a house situated in New Delhi, part of which was let out and part of which was occupied by the assessee. The Tribunal determined the annual value of the house on the basis of the actual rent received for the portion occupied by the tenant and at 10 per cent of the other income of the assessee for the self-occupied portion. The Tribunal rejected the assessee's contention that the annual value had to be determined on the basis of the standard rent, determinable on the basis of the provisions of the Delhi Rent Control Act. The Supreme Court held that the annual value of the house under self-occupation must be taken to be the standard rent determinable under the provisions of the Delhi Rent Control Act. In other words, the law enunciated by the Supreme Court was that, in respect of property under self-occupation of an assessee, the rent to be estimated for the purpose of Section 22 should be the standard rent determinable under the provisions of the Delhi Rent Control Act. Let us now see what did the Delhi High Court approved in the assessee's own case for the earlier assessment year. The DVO valued the assessee's share in the property owned by the firm by applying two criterial: in respect of the property tenanted, he valued t, it by capitalising the rent, i.e., he adopted income method for that portion of the property and for the self-occupied portion, he estimated the value on the basis of the rates prevalent for sale of commercial flat in the vicinity and the value of the land on the basis of sales in the adjacent area. The assessee contended that for the self-occupied portion also the DVO should have applied the income method by estimating the income that the property would fetch, if let out adopting that rent as stipulated in the Delhi Rent Control Act. As the DVO did not accede to this request, the petitioner approached the High Court by way of a writ petition under article 226 of the Constitution. The High Court held that the method adopted by the DVO in valuing the self-occupied portion of the building and his approach were in keeping with the principles of valuation. The report could not be said to be irrational or based on no material. The High Court pointed out that only when the valuation report is shown to be based on no evidence or irrelevant material or is arbitrary and fanciful or based on undisclosed material, a writ of certiorari will issue. In arriving at this conclusion, the High Court pointed out that there was material before the DVO but at the same time the High Court pointed out that if there were no such instances of sales available, then capitalisation of rent or making some sort of comparative valuation would be an acceptable mode of valuation. In other words, if there are instances of sales available, capitalisation of rent method could not be available, but if instances of sales are not available, then capitalisation of income would be the only reasonable method.
2. Now in this case what happened, the WTO valued this property by adopting the value as fixed by the DVO rejecting the assessee's contention. The Commissioner (Appeals) accepted the assessee's plea and held that even the self-occupied portion of the property must be valued on income method by estimating the income as laid down by the provisions of the Delhi Rent Control Act. It is this finding that was found unacceptable to the department to get a reversal of which an appeal was filed before the Tribunal. The learned Judicial Member, who wrote the leading order after considering the arguments, addressed and referring to the facts of the case in sufficient detail held that since the matter was already decided by the High Court in the assessee's own case, the valuation of the property must be done in accordance with that decision and for that purpose he remitted the case back to the file of the Commissioner with the following observations : 13. The learned Commissioner (Appeals) in the given circumstance does not appear to be justified to hold that the provisions of the said Act were applicable to the self-occupied portion of the property for working out the fair market value. In fact such fair market value was required to be determined on the basis of principle adopted by the learned District Valuation Officer, which principle had earlier been approved by the Hon'ble Delhi High Court in the assessee's own case. On behalf of the assessee Shri G.R. Agnihotri, the learned counsel, very vehemently found fault with the approach and method of the District Valuation Officer. We do not propose to deal with each facet pointed out by the learned counsel as the assessee will have a proper opportunity to make his comments on the method. At the present juncture we are concerned with the limited question as to whether the provisions of the Act were relevant for working out the fair market value. Our considered answer is in the negative and against the assessee. We, therefore, hold that the learned Commissioner (Appeals) was not justified to observe as he did. Thus the value of the property has got to be determined according to the method adopted by the learned District Valuation Officer and approved by the High Court, of course, subject to the objections raised by the learned counsel and their proper consideration at the appropriate stage. We decide this issue accordingly. Matter is restored to the file of learned Commissioner (Appeals).
The learned Accountant Member had his reservations in agreeing with this view. He held that the provisions of the Delhi Rent Control Act had to be considered in valuing the self-occupied portion. Noticing the judgment of the Supreme Court in Amolak Ram Khosla's case (supra), he held that it was very difficult to ignore the ruling of that decision and to hold that the concept of standard rent of the Delhi Rent Control Act was not applicable at all in valuing the self-occupied portion of a property for the purpose of wealth-tax. The market value has to be determined for the purpose of wealth-tax and the market value even according to the Act has to be determined in certain circumstances with reference to gross maintainable rent. The Rules even provided for what would constitute gross maintainable rent. Such being the clear mandate of the Act, he felt it difficult to agree with the view that the provisions of the Delhi Rent Control Act were not to be considered at all. He held that the Delhi High Court while deciding the appellant's case for the earlier year in Wenger & Co.'s case (supra) had no occasion to refer to the Supreme Court judgment in Amolak Ram Khosla's case (supra) as that decision came much later. He, therefore, held it would not be fair to record any positive opinion at the stage of setting aside the assessment and restoring the matter back to the Commissioner (Appeals) for fresh hearing but it would be proper and fair to simply restore the matter to the Commissioner (Appeals) without placing any restraints on his power to decide the matter afresh. As I quoted earlier there was no difference of opinion between the learned Member on the matter that the appeals should be restored to the file of the Commissioner (Appeals) for fresh hearing but the difference of opinion was only on the restraints to be placed. While the learned Judicial Member felt that the restraints should be placed the learned Accountant Member felt that in view of the subsequent development of law no restraints should be placed. This is in effect the difference of opinion sought for the opinion of the Third Member conveyed by the first question.
3. I have gone through the record very carefully and after hearing the learned departmental representative and the assessee's counsel Shri G.R. Agnihotri, as I mentioned earlier, 1 did not find any difficulty in coming to the conclusion that while the matter is going back to the Commissioner (Appeals) for a fresh decision, there should be no fatters placed upon his discretion to value the property according to the principles applicable for the valuation of properties for wealth-tax purposes. The Supreme Court in Amolak Ram Khosla's case (supra) had in unequivocal terms laid down the principle that in arriving at the annual income for the purpose of Section 22 and Section 23, the standard rent determinable under the Delhi Rent Control Act should be adopted as the basis for self-occupied property even in a case where the property was partly let out and partly self-occupied. There is no escape from the application of that rule in making an assessment for the purpose of income-tax. When for the purpose of income-tax, the income from a particular property, which is partly let out and partly self-occupied is to be arrived at in a particular manner, if the property is to be valued for the purpose of wealth-tax, then the same income arrived at for income-tax purposes should also be the basis for the purpose of capitalisation for wealth-tax purposes. The income for the purpose of wealth-tax should not be different from the income ascertained for income-tax purposes ; at least there is no reason to deviate. Recently, the Supreme Court had an occasion to discuss the determination of annual value for the purpose of levy of municipal tax, wealth-tax for residential purposes, non-residential purposes, self-occupied and partly self-occupied, built on leasehold land? free land and built at stages, large buildings and small buildings, etc. In this case after discussing the provisions of the Delhi Municipal Corporation Act, 1957, the scheme of that Act and the decision given by the Supreme Court in Dewan Daulat Rai Kapoor v. NDMC [1980] 122 ITR 700, the Supreme Court laid down the principle again, that the standard rent determinable on the buildings set out in the Delhi Rent Control Act was laid down by the supreme Court as the upper limit of the rent which the landlord may expect to receive from a hypothetical tenant if the buildings were let out to him from year to year. In other words, the rent to be fixed under the Municipal Corporation Act cannot exceed the standard rent. Then the Supreme Court went on to explain how the standard rent should be fixed under the Municipal Corporation Act and the Delhi Rent Control Act, 1958 read with Punjab Municipal Act, 1911.
The Supreme Court laid down as follows : In the case of premises which are partly self-occupied and partly let out, it is the premises as a whole which are liable to be assessed to property tax and not different parts of the premises as distinct and separate units. But, while assessing the rateable value of the premises on the basis of the rent which the owner may reasonably expect to get if the premises are let out, it cannot be overlooked that where the premises consist of different parts which are intended to be occupied as distinct and separate units, the hypothetical tenancy which would have to be considered would be the hypothetical tenancy of each part as a distinct and separate unit of occupation and the sum total of the rent reasonably expected from a hypothetical tenant in respect of each distinct and separate unit would represent the rateable value of the premises. The rent which the owner of the premises may reasonably expect to receive in respect of each distinct and separate unit cannot obviously exceed the standard rent of such unit and the assessing authorities would, therefore, have to determine the standard rent with a view to fixing the upper limit of the rent which can reasonably be expected by the owner on letting out such unit to a hypothetical tenant.
It would, thus, be seen that the principle laid down in Amolak Ram Khosla's case (supra) was again reiterated by emphasising the fact that in case of a house which is partly self-occupied and partly let out each portion should be treated as separate and distinct and the standard rent for each unit should be separately fixed and aggregated so that the aggregate does not exceed the standard rent of the unit.
Therefore, the principle that now emerges is that if a property is to be valued on the basis of income that the property is likely to yield, then that income cannot but be determined except in accordance with the Municipal Corporation Act. This being the rule laid down by the Supreme Court, the rent has to be determined only according to that principle.
Now let us see whether the Delhi High Court judgment given in the assessee's own case for the earlier years has any application to the facts of this case as was supposed by the learned Judicial Member. I have briefly touched upon the facts obtaining in the assessee's case for the earlier years that went before the High Court for its adjudication. Reiterating briefly again that was a writ filed by the firm of Wenger & Co. and others in which the assessee was a partner against the DVO New Delhi, challenging the method of valuation adopted by him for the purpose of valuing the property owned by the firm which was partly self-occupied for the business of the firm and partly let out. In respect of let out portion the DVO adopted the income method but in respect of the portion occupied for the purpose of the firm, now recorded as occupation for self, he adopted the land and building method by relying upon certain sales instances. The case before the High Court was whether this method could be adopted in valuing the same property. The High Court saw no infirmity in this valuation provided there are instances to show the market value in respect of the self-occupied portion. Since there were instances the High Court held that the method could not be considered to be an incorrect method nor a method based on conjectures, surmises or unconscionable. That is to say in the earlier years the method adopted by the DVO, which was found to be unassailable by the High Court was an admixture of income method for the let out portion and land and building method for self-occupied portion. If the same method is adopted by the DVO in these years also then it is possible for one to say that there should be no objection to it except to contend that the instances of sale taken did not represent the correct market value so as to arrive at the correct market value for the self-occupied portion. But here I find from the record that the DVO has not gone on that basis at all but went by the income method in respect of both the portions. There is, thus, a departure in the valuation adopted by the DVO, which is so pronounced and prominent in the reports submitted by him, which was made a part of the record that there is no mistaking about it. In respect of the tenanted portion he has taken the rent at Rs. 6,884 but in respect of the self-occupied portion he had estimated the maintainable rent in the following manner :Ground floor=1,583.5 sq. ft. at the rate of Rs. 6 sq. ft.
9,501First floor=6,370 sq. ft. at the rate of Rs. 5 sq. ft.
31,850Second floor==757 sq. ft. at the rate of Rs. 4 sq. ft.
3,028 ---------- The total monthly rent was, thus, arrived at Rs. 51,260 per month or Rs. 6,15,120 per year from which the outgoings at Rs. 1,56,502 were deducted so that the net A.L.V. was determined at Rs. 4,58,618 and adopting a multiple of 8.475 capitalised the value at Rs. 38,86,788. To that the reversioner value of the land, arrived at Rs. 10,51,151 was added so that the total value of the property was arrived at Rs. 49,37,939. Allowing for the diminution in the value of the property on account of joint leasehold rights of the land at Rs. 4,93,794 the net value of the property was arrived at Rs. 44,44,000 and this value was adopted for the purpose of the wealth-tax assessment. In other words, the value arrived at by the DVO was only on the basis of the estimated maintainable rent for the self-occupied portion, which alone came to about Rs. 5,32,560 out of the total of Rs. 6,15,120 taken as the gross rent. So the question that now arises is whether it is open to the DVO to adopt the maintainable rent for self-occupied portion at Rs. 5,32,560 and whether it would correspond to the standard rent determinable under the Delhi Municipal Corporation Act read with the Delhi Rent Control Act as finally settled by the Supreme Court decision in Dewan Daulat Rai Kapoor's case (supra) and reiterated in Dr. Balbir Singh v. MCD [1985] 152 ITR 388 (SC) which was nothing but the reiteration of its earlier decision in Amolak Ram Khosla's case (supra) referred to in the judgment of the learned Accountant Member. When there is no escape from determining the maintainable rent in respect of self-occupied portion except in accordance with the Delhi Municipal Corporation Act, the question is whether it is open to the DVO to ignore this rent and the law relating to it and whether it is open to us to direct the Commissioner (Appeals) to ignore it. I am afraid that in view of the settled legal position by the Supreme Court it is not possible to ignore the mandate given by it. This would, in my opinion, be deviation from the law of the land. If the DVO had proceeded on the same basis as in the earlier years the position would have been totally different but that is not the position. When the DVO himself adopted the maintainable rent at a particular figure, the obvious and inevitable question that arises is whether the rent estimated by him as maintainable rent is the standard rent determinable under the Delhi Municipal Corporation Act and the Delhi Rent Control Act and the elucidation of this law by the Supreme Court in the case of Dr. Balbir Singh (supra). The learned departmental representative, who was present before me, made a feeble attempt to argue that this was not the basis that was adopted by the DVO but the report filed in the paper book particularly at page 42 of the paper book doss not support his contention. I am, therefore, of the opinion that the Commissioner (Appeals), to whom the matter is going back for a fresh valuation should be free to redetermine the value of this property with reference to the standard rent ascertainable by the application of the provisions of the Delhi Municipal Corporation Act and not in accordance with the decision given by the Delhi High Court in the assessee's own case in Wenger & Co.'s case (supra) all because the method of valuation adopted by the DVO was different from the valuation adopted in the earlier years. For the above reasons, I am in agreement with the view expressed by the learned Accountant Member.
4. The High Court in the assessee's case was not concerned with the valuation of the property on the basis of income method in respect of both tenanted as well as self-occupied portion. The High Court was concerned with a method of valuation where for the self-occupied portion land and building method was adopted and for tenanted portion income method was adopted and the values arrived at were added to arrive at the total value of the property. The High Court held that there was nothing wrong in that method provided the market value is correctly arrived at based upon appropriate instances of sale of some property in the vicinity. While approving this method the High Court also laid down the principle that in the absence of instances of sale, the income method must be resorted to even for the self-occupied portion. Now as I have noticed that method, if I may say so, was not scrupulously followed and a different method of estimating the value of the property even in respect of self-occupied portion on the basis of income method was adopted. So the question of applying the High Court decision of the earlier years does not arise. This disposes of the first point of difference of opinion referred to me.
5. Insofar as second point of difference of opinion is concerned, this matter is already decided by a Full Bench of the Tribunal in L.
Gulabchand Jhabakh's case (supra). I do not have to dwell much on the subject because this matter is already stands concluded by a decision of the Special Bench decision. The learned Judicial Member had reservations to follow the Special Bench decision of the Tribunal only for the reasons that it seemed to him that the decision of the Patna High Court in the case of Nand Lal Jalan (supra) was not noticed by the Special Bench. The learned Accountant Member has pointed out in his differing order that the Special Bench did notice Nand Lal Jalan's case (supra). Therefore, it seems to me factually not correct to say that the Special Bench did not notice the Nand Lal Jalan's case (supra) which was the only reason for the learned Judicial Member to express a view different from that of the Special Bench. The learned departmental representative has nothing to say in this regard. I am, therefore, of the opinion that this matter having been decided by the Special Bench of the Tribunal, nothing more survives to mention to me except to state that that decision should be followed insofar as assessing the partners are concerned while granting exemption under Section 5(1)(iv).
6. Now the matter will go before the regular Bench for disposing of the appeals in accordance with the opinion of the majority.